The Federal Reserve raised a key short-term interest rate a quarter of a percentage point Tuesday and signaled that more rate hikes may be needed, disappointing some investors who thought the central bank was nearly through with its rate-hiking campaign.

In its widely watched statement, the Fed indicated that more rate hikes may be necessary in the next few months. "Some further policy firming may be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance," the central bank's policy-makers said in their statement.

That news sent stocks, which were trading modestly higher before the announcement, into the red. Bond prices tumbled, pushing the yield on the 10-year Treasury up to 4.78 percent, the highest since March 7, when it touched 4.80 percent. Bond prices and yields move in the opposite direction.